The Australian Horticultural Corporation
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INDUSTRY COMMISSION THE AUSTRALIAN HORTICULTURAL CORPORATION Effectiveness in Increasing International Competitiveness REPORT NO. 24 30 June 1992 Australian Government Publishing Service Canberra © Commonwealth of Australia 1991 ISBN 0 644 25352 5 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Australian Government Publishing Service. Requests and inquiries Concerning reproduction and rights should be addressed to the Manager, Commonwealth Information Services, Australian Government Publishing Service, GPO BOX 84, Canberra ACT 2601. Printed in Australia by P. .J. GRILLS, Commonwealth Government Printer, Canberra INDUSTRY COMMISSION 30 June 1992 The Honourable J S Dawkins, M.P. Treasurer Parliament House CANBERRA ACT 2600 Dear Treasurer In accordance with Section 7 of the Industry Commission Act 1989, we have pleasure in submitting to you our response to paragraph 4 of the reference on Australian Horticulture. Yours sincerely R G Mauldon R R Piggott Presiding Associate Commissioner Commissioner COMMISSIONER Benjamin Offices, Chan Street, Belconnen ACT Australia PO BOX, Belconnen ACT 2616 Telephone: 06 264 1144 Facsimile: 06 253 1662 CONTENTS Page Abbreviations ix Terms of reference x EXECUTIVE SUMMARY xi 1 INTRODUCTION 1 1.1 The terms of reference 1 1.2 The Australian Horticultural Corporation 1 1.3 Conduct of the inquiry 2 1.4 Structure of the report 2 2 HORTICULTURE 3 2.1 Characteristics of Australian horticulture 3 2.2 Australian production and trade 4 2.3 Perceptions of horticulture 14 3 AHC: ORIGINS AND STATUTORY BASIS 17 3.1 Origins 17 3.2 Objects 18 3.3 Functions 19 3.4 Powers 20 3.5 Coverage and current membership 20 3.6 Corporate structures 23 3.7 Finance 24 4 AHC ACTIVITIES 27 4.1 Corporate plan 27 4.2 Scale of operations 28 4.3 The joining process 30 4.4 Participating industry programs 36 4.5 Fee-for-service 43 4.6 AHC initiated activities 44 IV THE AUSTRALIAN HORTICULTURAL CORPORATION 5 EFFECTIVENESS OF THE AHC 51 5.1 Identifying changes in international 51 competitiveness 5.2 The measurement problem 52 5.3 Attributing changes to the AHC 53 5.4 The timing of change 55 5.5 Extent of AHC influence 56 5.6 Acceptance by industry 56 5.7 Participants’ views on the terms of reference 58 5.8 The Commission’s approach 59 5.9 Assessment of effectiveness 81 5.10 Government support 83 APPENDICES A Inquiry participants 85 B Statistics 89 C AHC legal framework 97 D AHC corporate plan 107 E Draft memorandum of understanding 109 F AHC accounts 113 G Export licensing 117 H AHC assessments 121 TABLES 2.1 Australian production of major fruits and vegetables, 6 1980 and 1990, kilotonnes 2.2 Australian production of fruit, nuts and vegetables, 8 1980 and 1990, by value, $ million (1989-90) 2.3 Fruit and vegetable exports, Australia and selected 11 countries, by value, $US million (1990); and annual growth rates 3.1 AHC industry coverage, by gross value of production, 21 1989-90, $ million 4.1 Funds devoted to horticulture, 1990-91, $ million 29 4.2 Cost of participating industry activities, 1990-91, $’000 38 CONTENTS V 4.3 AHC fee-for-service work, 1990-91, dollars 44 4.4 AHC sector-wide marketing programs, 1990-91, $’000 45 4.5 AHC corporate costs, 1990-91, $’000 48 CHARTS 2.1 Relative sizes of Australian agricultural sectors, 7 1989-90, by value, $ million 2.2 Australian horticultural production, 1989-90, 7 by value, $ million 2.3 Australian trade in fresh and processed horticultural 10 products, 1984-85 to 1990-91, by value, $ million (1989-90) REFERENCES 131 VI THE AUSTRALIAN HORTICULTURAL CORPORATION ABBREVIATIONS AAPGA Australian Apple and Pear Growers’ Association ABS Australian Bureau of Statistics ACGF Australian Citrus Growers’ Federation AHC Australian Horticultural Corporation AHEA Australian Horticultural Exporters’ Association AHGC Australian Horticultural Growers’ Council AHQCS Australian Horticulture Quality Certification Scheme AJCE Australian Joint Citrus Exporters BFC Batlow Fruit Co-op DPIE Department of Primary Industries and Energy EMDG Export Market Development Grant HPC Horticultural Policy Council HRDC Horticultural Research and Development Corporation MAC Market Access Committee MVCMB Murray Valley Citrus Marketing Board SMA Statutory marketing authority TWI Trade weighted index UFS United Farmers & Stockholders of South Australia WAFGA Western Australian Fruit Growers’ Association ABBREVIATIONS IX TERMS OF REFERENCE Horticulture Industry Commission Act 1989 I, RALPH WILLIS, in pursuance of Section 7 of the Industry Commission Act 1989 hereby: 1. refer the Australian horticultural industry to the Industry Commission for inquiry and report within twelve months of receipt of this reference; 2. specify that the Commission examine the production and cost structure of the Australian horticultural industry, assess the methods used by selected other countries to support horticultural exports, and identify structural and other issues which, in comparison with overseas producers, affect the competitiveness of Australian producers in overseas markets; 3. specify that the Commission report on institutional or regulatory factors subject to influence by Governments in Australia which are impeding the development of an internationally competitive horticultural industry and horticultural exports, and advise on courses of action which will raise overall economic efficiency; 4. without limiting the scope of the reference, request that the Commission assess the effectiveness of the Australian Horticultural Corporation in increasing the international competitiveness of the Australian horticultural industry, and report on this matter by 30 June 1992; and 5. specify that the Commission avoid duplication of recent substantive studies. Ralph Willis 18 December 1991 X THE AUSTRALIAN HORTICULTURAL CORPORATION EXECUTIVE SUMMARY • This report addresses the question of whether the AHC has been effective in increasing the international competitiveness of Australian horticulture. • The short period during which the AHC has been operating, the lags involved with the effects of activities designed to increase international competitiveness, and the paucity of data, do not allow for a comprehensive statistical analysis of changes in international competitiveness. • The extent of industry participation in the activities of the AHC is not a sound test of the effectiveness of the AHC. Industries might participate for reasons other than a perception that the AHC can increase international competitiveness. • The approach adopted by the Commission has been to determine whether activities undertaken by the AHC are consistent with increasing international competitiveness. The Commission found that several of the activities fall into this category in that they are aimed at increasing profitable exports of horticultural products. • The Commission proposes that Commonwealth funding of AHC activities be extended until 30 June 1994, but that the purposes for which those funds are used be limited and that there be stricter reporting requirements than in the past. Any commitment to provide funding beyond June 1994 should only be made following consideration of the Commission's more general report on horticulture to be presented in December 1992. EXECUTIVE XI SUMMARY 1 INTRODUCTION 1.1 The terms of reference This report deals with one part of a broad ranging inquiry into Australian horticulture. In December 1991 the Government asked the Industry Commission to report within twelve months on a variety of matters relating to the international competitiveness of the horticultural sector. As part of that inquiry, the Commission was asked to provide a separate report by 30 June 1992 assessing the effectiveness of the Australian Horticultural Corporation (AHC) in increasing the international competitiveness of the Australian horticultural industry. 1.2 The Australian Horticultural Corporation The AHC is a statutory authority responsible to the Minister for Primary Industries and Energy. It was established in August 1988 under the Australian Horticultural Corporation Act 1987. According to the Act, the principal objective in establishing the AHC was to assist Australian horticultural industries to achieve their full potential in overseas markets. More details on the origins of the AHC can be found in Chapter 3. Participation in the AHC by an individual industry is voluntary and is based on the decision of its peak national body which must have the support of a majority of the industry. The industries presently participating in the AHC are the pome fruits, citrus, nashi, nursery, macadamia, avocado and chestnut industries. The honey industry has agreed to participate. The dried vine fruits industry participates under a special, more autonomous, arrangement. No vegetable industries are presently participating. More details on participation in the AHC can be found in section 3.5. Funding for the AHC is primarily by producer levies and export charges, amounting to $2.9 million and $0.4 million, respectively, in 1990-91. It also received a total of $5.85 million from the Commonwealth Government over its first five years to help with establishment costs. That funding will terminate at 30 June 1993. INTRODUCTION 1 1.3 Conduct of the inquiry Following receipt of the Government’s reference the Commission held discussions with industry bodies and distributed an issues paper which drew attention to the Commission’s perception, at that time, of the major